Reflecting on the corporate opportunity rule in company law through a jurisprudential review of Modise v Tladi Holdings (Pty) Ltd 2020 4 All SA 670 (SCA)

Abstract

Directors' fiduciary duties form part of foundational principles in corporate law. This concept has its foundations in the law of agency. Prior to the Companies Act 71 of 2008 (the Companies Act), fiduciary duties were governed under common law, however, the advent of the Companies Act resulted in the partial codification of fiduciary duties. One of the central fiduciary duties is the duty of directors to avoid conflict of interest. This duty restricts the directors of a company from having their personal interests impede those of the company. There are separate rules that flow from the directors' duty to avoid conflict of interests, including the corporate opportunity rule. The corporate opportunity rule dictates that directors must not use their position to unfairly benefit from the contracts and/or information that rightfully belongs to the company they are managing. The objectives of the corporate opportunity rule were clarified in Modise v Tladi Holdings (Pty) Ltd (the Modise case). In partially confirming the judgment of the court a quo the Supreme Court of Appeal held that the ambit of breaching the corporate opportunity rule includes the illegal use of the property and confidential information of the company by a director for personal gain. This article agrees with the reasoning of both the High Court (court a quo or trial court) and the Supreme Court of Appeal in the Modise case on the issue of prescription although the article raises concerns about the decision of the Supreme Court of Appeal on a similar issue. Further, the article concurs with the reasoning of both the court a quo and the Supreme Court of Appeal in concluding that the applicants breached their fiduciary duty when they appropriated a corporate opportunity that belonged to the company. One of the major lessons that could be learnt from the Modise case is that directors, especially those who serve on multiple boards, should exercise extreme caution with potential conflicts of interest.